Correlation Between Penumbra and Bone Biologics

Can any of the company-specific risk be diversified away by investing in both Penumbra and Bone Biologics at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Penumbra and Bone Biologics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Penumbra and Bone Biologics Corp, you can compare the effects of market volatilities on Penumbra and Bone Biologics and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Penumbra with a short position of Bone Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Penumbra and Bone Biologics.

Diversification Opportunities for Penumbra and Bone Biologics

0.38

Correlation Coefficient

Penumbra  Bone Biologics

Weak diversification

The 3 months correlation between Penumbra and Bone is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Penumbra and Bone Biologics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bone Biologics Corp and Penumbra is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Penumbra are associated (or correlated) with Bone Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bone Biologics Corp has no effect on the direction of Penumbra i.e., Penumbra and Bone Biologics go up and down completely randomly.

Pair Corralation between Penumbra and Bone Biologics

Considering the 90-day investment horizon Penumbra is expected to generate 4.54 times less return on investment than Bone Biologics. But when comparing it to its historical volatility, Penumbra is 7.13 times less risky than Bone Biologics. It trades about 0.08 of its potential returns per unit of risk. Bone Biologics Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,050  in Bone Biologics Corp on December 28, 2024 and sell it today you would lose (1,030) from holding Bone Biologics Corp or give up 33.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	49.18%
Values	Daily Returns

Penumbra  vs.  Bone Biologics Corp

Penumbra

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Penumbra are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Penumbra displayed solid returns over the last few months and may actually be approaching a breakup point.

Bone Biologics Corp

Risk-Adjusted Performance

Insignificant

Over the last 90 days Bone Biologics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly fragile technical and fundamental indicators, Bone Biologics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Penumbra and Bone Biologics

The main advantage of trading using opposite Penumbra and Bone Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Penumbra position performs unexpectedly, Bone Biologics can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bone Biologics will offset losses from the drop in Bone Biologics' long position.

The idea behind Penumbra and Bone Biologics Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.